As the owner or part-owner of a private company limited by shares, there may come a time when you want to transfer some of your shares in the company to your husband, wife, or civil partner. Here, we’ll answer whether or not you can do this, look at why you would want to do this, and cover the key consideration you should bear in mind before doing it.
Transferring shares to a spouse, is it allowed?
Yes, there is nothing written in company law that prohibits shareholders (the owners of a limited company) from transferring their shares to a spouse. In fact, shares can be transferred to anyone, even children.
The only potential stumbling blocks that you may encounter are the articles of association, the shareholders’ agreement, and your fellow directors and shareholders. Let’s explore this in more detail.
1. The articles of association
This is the internal company document that provides the steer for how the company is going to be run.
It is possible that the articles of association for a company restrict the movement of shares between spouses.
The majority of companies formed in the UK are done so using the Model articles of association. This is a general version of the document that is appropriate for the majority of companies. The Model articles of association do not include anything that prohibits the transfer of shares between spouses.
However, it is possible to form a company using an amended version of the articles of association or even a wholly rewritten version – that does impose restrictions on how a shareholder’s shares are handled.
You’ll probably know what version of the articles of association your company was formed with, but if you’re unsure, we recommend checking. If your company was formed by Quality Company Formations, you can view the full document from your Client Portal. Otherwise, you can access the document using the Companies House ‘Search the register’ system.
2. The shareholders’ agreement
While the articles of association are focused on the relationship between shareholders and officers (directors and secretaries) to the company, the shareholders’ agreement – as the name would suggest – hones in on the relationship of a company’s shareholders.
Unlike the articles of association, a company does not need a shareholders’ agreement in place. However, when shareholders have agreed to its implementation, it forms a legally binding contract. This can be vital, as well as simply useful if shareholder disputes ever do arise.
When a shareholders’ agreement has been used, it could include rules on how shares are transferred, including restrictions on transfers between spouses.
If your company has a shareholders’ agreement, you should check this document to see if there are any restrictions.
3. Fellow directors and shareholders
If you’re currently running your business as sole director and shareholder, it’s unlikely that your articles of association prohibit the transfer of shares to a spouse, and you probably won’t have a shareholders’ agreement in place.
In this instance, it’s ultimately up to you who you give or sell company shares to – if anyone.
However, if you are running the company alongside other directors and shareholders, they can veto who you transfer shares to, even if there are no restrictions in the articles of association or shareholders’ agreement (if one has been used).
Why transfer shares to a spouse?
There are a number of reasons why someone may transfer company shares to their husband, wife, or civil partner.
Planning for the future
Whilst it’s not as obvious or long-term as passing shares on to a next of kin, transferring shares to a spouse provides an element of succession planning.
This is particularly resonant if the shareholder making the transfer is going through a period of ill-health, and wishes to ensure some control of the company stays within the family – if they become incapacitated, or die.
For the betterment of the company
The incoming spouse may possess a number of talents that could genuinely help the business achieve success.
This could be a very particular skill that will come in handy, a general outlook that could benefit the business, or maybe a healthy contacts book.
A trusted individual who can help the business should be welcomed, and who’s more trusted than a spouse?
By transferring shares to a spouse, a shareholder is sharing any dividends that are issued.
On the face of it, this may seem pointless. Why share what is already yours? However, the dividend tax that you pay depends on the income tax band that you fall into.
By sharing out dividends (via a share transfer), the dividend tax you and your spouse pay is more likely to fall into the personal allowance bracket or one of the lower tax rates.
Shares will generally come with voting rights, which are representative of power in the company.
Depending on your company’s specific share structure, by giving shares to your spouse – provided your spouse’s line of thinking is similar to yours – you can exercise more power over the company.
Of course, as we touch on below, this can backfire.
The key consideration before transferring shares to a spouse
It may make for uncomfortable reading, but the main thing you need to think about before completing a share transfer to your husband, wife, or civil partner, is just how solid your relationship is.
Shareholding disputes are obviously unpleasant. Add the breaking down of an intimate relationship to the mix, and you have the recipe for disaster – from a personal and business perspective. A great deal could be lost.
No one knows what the future holds, but when it comes to your relationship, you and your partner will have a better idea than anyone else, so ultimately the decision of whether to transfer shares or not falls to you.
Thanks for reading
So there you have it. Can you transfer shares to your spouse? Absolutely, provided that there are no rules set out in your company’s articles of association, or the shareholders’ agreement, that prohibits you from doing this. Also, if you are running the company with other directors and shareholders, they will need to sign this off.
About our Transfer of Shares Service
Correctly transferring shares in a limited company can be a complex process, so why not let our company experts take care of this for you?
With our Transfer of Shares Service, available for only £69.99 (plus an additional £24.99 if you would like us to file a confirmation statement), our specialists can take care of the necessary steps required to compliantly transfer shares, to a spouse – or anyone else.
The service includes the preparation of the J30 stock transfer form, meeting minutes, and share certificates.
We hope you have found this post helpful. If you have any questions about the information covered in this blog or our services, please leave a comment and we’ll get back to you as soon as possible.